California Real Estate — January/February 2014
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Why You Should Care About Demographic Trends
Marcie Geffner

THREE THOUGHT LEADERS SHARE TIPS FROM THEIR RESEARCH

Three respected demographic researchers gathered on stage at last year’s EXPO to participate in an important discussion about California’s home buyers and sellers. “Understanding Today’s Consumer: The Impact of Demographic Trends,” was moderated by C.A.R. CEO Joel Singer, and participants addressed many complex questions facing the industry: How can we work toward cultivating future buyers? What role will immigrants play in this future? What will it take for Millennials to begin buying homes? • The end result was several ideas to help all of us work toward an optimistic future. Singer summed it up well when he said, “Clearly, there are opportunities in demographics. And as we look beyond the next 10 to 12 years, the public policy issues touched on during this panel are going to determine the future of this industry.” • This discussion was part of C.A.R.’s new Thought Leadership initiative, which aims to encourage high-level intellectual engagement in order to promote C.A.R.’s presence as a leading housing organization, and, through those efforts, enhance the professional reputation of all members.

DOWELL MYERS

Cultivate first-time home buyers

Dr. Dowell Myers, professor of urban planning and demography at the USC Price School of Public Policy and director of the USC Population Dynamics Research Group, is optimistic about the future of housing, but emphasized that the current climate is uncertain and mercurial. “It’s the most volatile time since World War II in the U.S. in three ways. It’s the most volatile demographically…. It’s also the most volatile economically. We’re still wondering what’s going to happen with interest rates. We thought they were going up, and they went down again It’s very unpredictable. And to top it all off, it’s the most volatile politically, where we don’t know what’s going to happen with Fannie Mae and Freddie Mac.”

Despite this difficult period, Myers thinks that with the implementation of the right plans, policies, and actions, housing will be “firing on all cylinders.” He explained, “We’ll have the immigrants moving up the ladder. We’ll have the young people moving up the ladder. It just depends on those sellers out there. Those sellers have got to be willing to put their houses on the market. Right now, everybody’s waiting. I call this ‘the big pause.’ Everybody’s on pause. And the big question is what it will be like when the pause is over, when we get to the other side of the valley?”

Myers believes that a key factor to ending this “big pause” is Millennials aging into their 30s, because he predicts that this group will soon be ready to push play, and start buying homes. “[Millennials] will stoke your [population of] first-time buyers with a lot more people. They Are just not in the right age-range yet. Give them time. Give them tools. Give them hope, and they will go for it. As we come out of the recession, the demography is on your side. It’s a positive force. But we have to actually cultivate it.”

To encourage this cultivation, Myers turned to his expertise as an urban planner by positing that the industry first must address resistance to zoning for new construction because afford-ability has been hampered by a shortage of supply. He noted that low inventory in the supply chain is at odds with “builders that are willing to build now. They’re really coming back.” Myers spoke in favor of the supply-side argument that building starter homes in desirable areas specifically for young people will allow them to work their way up the ladder and contribute positively to the housing market. He added, “The potential demand is really huge. The downside, or The upside of the downside, is that there’s a lot of rebound yet to happen — a lot of pent-up demand.”

But Myers is worried about meeting the needs of this demand, stating, “One of my worries is that we’ve had such a long period of low construction — of low apartments since 1990 and low single-family homes since 2005 or so. People have gotten used to that as being the, quote, ‘new normal.’ They think no construction is [normal]. Well, that’s good for those who already own homes, but it puts a pressure cooker on prices.” After all, high prices are a significant barrier to first-time buyers being able to enter the market.

Another part of the demographic picture is aging Baby Boomers who need options for moving out of their homes. Myers noted that this demographic group represents an opportunity for REALTORS®, though it’s not clear what options Boomers want. He surmised that they’ll “fragment into different little subgroups,” some moving into downtown condominiums, others heading, literally, for the hills, and many hunkering down until they’re offered what they consider to be acceptable prices for their homes.

Boomers will also influence housing demand as they age out of the workforce, Myers noted. Their retirement will allow younger people to advance and earn the higher incomes they’ll need to buy homes, and he warned that we should ensure there are homes available for them to buy.

SUSAN BROWN

Help immigrants attain legal status

Dr. Susan Brown, professor of sociology at the University of California, Irvine and associate director of the UCI Center for Research on Immigration, Population and Public Policy, studies economic mobility of immigrant populations, among other topics. One of her principal findings is that the children, and even more so the grandchildren, of immigrants tend to be significantly more prosperous than the first-arrival generation.

“There is very much an upwards trajectory,” Brown explained. “Their education goes up. Their income [goes up] a little bit [as does] their willingness to move to more integrated areas, wealthier areas. The grandchildren really make a big change.”

Homeownership is the one exception to that pattern since it’s a major aspiration not only of the grandchildren, but also their parents, Brown added. “The children of immigrants want to be homeowners,” she said.

Her research also has shown that children benefit greatly when their parents attain legal status in the U.S. And that, she said, has important implications for housing and REALTORS®.

“You probably don’t think immigration legislation matters that much to the real estate industry, but it does very much matter because the children of immigrants really benefit when their parents are legal, and these children are American citizens,” she said. "Giving them an opportunity to legalize and put down roots and saying, ‘We welcome you here,’ is important.”

Another key public policy issue for REALTORS® should be making education more affordable so that graduates aren’t so burdened by student loans that they can’t obtain financing to buy a house, Brown suggested. Whether that means supporting more Funding for universities, lower interest rates for student loans or even a federal tax deduction for student-loan interest, it’s important to find ways to overcome those stumbling blocks for younger people who want to become homeowners, she said.

One immediate demographic prospect group for REALTORS® is Millennial Asians, Brown said, because they dislike rental housing so much that they often live with their parents until they can afford to buy a home.

“California is getting more and more Asian immigrants. That’s the enormous Growth area, and the Asian immigrants are very strongly going to be homeowners,” she said.

Asian immigrants are moving to California from China, Korea, India and the Philippines, among other countries, and settling primarily in the San Francisco Bay Area, Los Angeles and Orange County.

RIVA FROYMOVICH

Make home-buying “super easy”for Millennials

Riva Froymovich, journalist and author of End of the Good Life: How the Financial Crisis Threatens a Lost Generation-and What We Can Do About It (Harper Perennial: 2013), offered a different perspective for REALTORS® who want to understand Millennial consumers, born after 1983, and sometimes called Generation Y, Generation Next or Echo Boomers.

Millennials want to buy homes, but their aspirations, expectations and challenges differ from those of other generations, Froymovich said.

“What do Millennials want? They want to live in a place with a lot more density. They want access to transportation networks. They value design and quality over size. The bigger question is: Can they afford it? This generation is growing up in the wake of the biggest financial crisis in 50 years, they are credit-averse, and the reason they are creditaverse is that they have taken out a lot of loans to pay for their college education,” she explained.

Millennials are impatient, goal-oriented and creative problem- solvers. They expect to change jobs and move every four or five years, but they’re also open to buying smaller homes and fixer-uppers, Froymovich said.

From a public policy perspective, helping Millennials become homeowners and achieve their other goals hinges on giving them more attractive employment opportunities.

“You have to give people jobs so they can afford a mortgage,” Froymovich said. “Women are becoming more educated in the U.S. and contributing more to big purchases, so we have to figure out a way to get women into better jobs and get more people employed.”

Millennials “like to work,” Froymovich added, so perhaps it’s no surprise that they expect plenty from their REALTOR®.

Among their desires are education in bite-sized bits, communication by email, not telephone, and a “housing partner” who will help them through the homebuying process and more.

“Tell me about [buying a house] in a way that’s super, super easy for me to comprehend,” Froymovich instructs. “Like my Twitter stream or my Facebook. I want bullet points. I want it step-by-step. I want a guide. Make it easy for me, and I’m going to go with you and be able to make that purchase.”

Marcie Geffner is an award-winning, freelance reporter. Follow her @marciegeff.
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